Jesse Norman: This is another kaleidoscopically exciting measure alongside some of those that have already got the hon. Member for Ilford North so excited. I am happy to be able to titillate him further by discussing further changes to the non-UK-resident companies that carry on UK property businesses. Clause 31 and schedule five make amendments to legislation that provides that non-UK-resident companies carrying on a UK property business will be charged corporation tax from 6 April 2020.
In the Finance Act 2019, the Government legislated to bring non-resident companies that carry on a UK property business or who received other income from UK land within the charge to corporation tax from 6 April 2020. At present, they are within the charge to income tax.
These changes make four minor amendments to the legislation that took effect in April 2020. They maintain the treatment of non-trading interest income of non-resident companies. They provide relief for interest expenses paid prior to the commencement of the non-resident companies’ UK property business—a UK resident company can already obtain relief for this type of expense. The time limits for making certain elections in respect of  derivative contracts will only start to run for a non-resident company from 6 April 2020. Finally, for all companies, there is an exception from the obligation to notify chargeability to corporation tax if the taxable incomes have an amount on account of tax withheld from it. The changes clarify that the amount withheld on account of tax must meet the tax due on that income before the exception can apply.
These changes will ensure that there is a smooth transition for non-UK-resident company landlords from the income tax regime into the corporation tax regime. I therefore commend the clause and schedule to the Committee.

Jesse Norman: We now enter the lush hinterlands of the banking surcharge regime. Clause 32 makes changes to the regime that ensures that the surcharge operates as intended when it was introduced.
The Government believe that even as reliefs are provided to support the economy in response to the coronavirus, the tax rules should continue to operate fairly and consistently for all businesses within their scope. Previously, the Government have legislated so that banks make a fair tax contribution, which reflects the risks they pose to the UK economy. That is why the Government introduced the bank levy in 2011—a tax on banks and building societies’ balance sheet equity and liabilities. It is also why banks have been subject to additional taxes above and beyond general business taxation ever since then.
In 2015, the Government made changes to the bank tax regime to ensure the sustainability of the tax base. It introduced the bank levy rate, but offset that with the introduction of a new 8% surcharge on banks’ profits over £25 million, on top of corporation tax. The surcharge applies to corporation tax profits of banking companies within a banking group.
For corporation tax purposes, companies are able to make a number of adjustments when arriving at their profits. That might include transferring losses from one group company to another or carrying forward losses to the next accounting period. However, to ensure that banks are paying tax on all their banking profits, some of these are disallowed when arriving at the profits subject to the surcharge.
One such disallowed adjustment is for capital losses that are transferred from a non-banking company to a banking company and set against the capital gains of that banking company. That transfer should be disregarded when calculating the surcharge profit for the banking company. Currently, where these capital losses are carried forward to a future accounting period, that transfer is disregarded.
However, under the legislation as it stands, such transferred-in capital losses are not disregarded when they are set against the capital gains of the banking company in the same accounting period. That could, counter to the original intention, mean banks using losses from non-banking companies in their group to reduce their surcharge profits. That cannot be right, and the changes that we are making in the Finance Bill will ensure that it cannot happen. The changes made by clause 32 will stop surcharge profits being reduced by all capital losses transferred in from non-banking companies, whenever they are utilised against capital gains.
The changes made by clause 32 will ensure that the surcharge operates in the way that was intended when it was introduced. They will ensure that banks cannot reduce their profits subject to surcharge by using losses from non-banking companies in their groups. Above all, they will ensure that banks pay the additional tax on all their banking profits.